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Australian Dollar falls as RBA stays open to intervention; Reserve Bank of Australia could be leaning against the Aussie already
Topic Started: 22 Nov 2013, 08:07 AM (3,296 Views)
miw
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newjez
18 Dec 2013, 04:27 PM
Peter, I know what you are trying to say, but that wasn't your best post. Touching 1.83.dollar to pound.
Depends on your historical perspective doesn't it? I can remember $3 to the pound back in the day.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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newjez
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miw
18 Dec 2013, 05:01 PM
Depends on your historical perspective doesn't it? I can remember $3 to the pound back in the day.
Yea - I was in Perth then. Happy days - except there was bugger all work. So be careful what you wish for hey!

As for Peter's post, traders trade. They don't hold out because they see gains in a few years time.

But there is truth in what he said. There are many reserve banks who have taken a stake in the AUD. They won't be as quick to dump it. But I think by the time the US tapers, then they may think about reducing their investment. This is when we will start to see serious movement. 1:2 by easter? Maybe. UK may be raising rates by then. 1:2.5 by late 2014? A wet dream for me, but not beyond the bounds of possibility.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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peter fraser
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newjez
18 Dec 2013, 04:27 PM
Peter, I know what you are trying to say, but that wasn't your best post. Touching 1.83.dollar to pound.
That jump had everything to do with a jump in the UK Pound against a basket of currencies after some very good numbers, and little to do with the $Aussie.

What was your point?

Any expressed market opinion is my own and is not to be taken as financial advice
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RBA still open to dollar intervention

Reserve Bank of Australia Governor Stevens has again said he is open to intervening in financial markets to decrease the value of the Australian dollar and noted the importance of the bank's reserve fund.

The exchange rate has behaved lately more as might be expected in circumstances of easing monetary policy, noting its 13 per cent fall since February, he told the House of Representatives Standing Committee on Economics.

But asked about the possibility of intervening in the currency by selling Australian dollars and buying foreign currency, Governor Stevens said he preferred to remain ambiguous.

He told the committee that he's not ruling out intervening in currency markets.

"If it seems to be appropriate in the market conditions taking (into) account the fundamentals as best that we can judge, then we'd do so," Mr Stevens said.

"I don't really want to set out in advance specific triggers which might induce intervention."

Mr Stevens said it is not appropriate for the Australian dollar to be over 90 US cents at the moment.

"An exchange rate over a dollar or in the 90s (US cents) is unlikely to be a sustainable equilibrium over time," he said in Canberra.

"It wasn't wrong to go there for a time."

Reserve fund boost prudent: Stevens

Mr Stevens said it is important for Australia's financial stability for the central bank to have a reserve fund.

The federal government recently gave the RBA $8.8 billion to bolster its reserves, contributing to the $17 billion blowout in the 2013-14 budget deficit since the September election.

Mr Stevens says the fund is the RBA's principal capital reserve against balance sheet risks.

Half of its assets are domestic and the other half are more risky foreign currency assets.

The reserve fund had been run down in recent years following the rise in the Australian dollar, he said.

The fund needed to be rebuilt at the "earliest possible schedule" so the central bank's balance sheet "remained strong for whatever came down the track in the future".

"Having the Reserve Bank reserve fund at a prudent level is very important," Mr Stevens told the committee.

The RBA board had a "long-run aim" of increasing the fund to $15 billion.

Mr Stevens said he had discussed the reserve fund issue with Joe Hockey during his first meeting with the new treasurer after the election.

Asked by Labor MP Ed Husic whether he made a specific request to Mr Hockey, Mr Stevens said: "I didn't go there saying `could I please have $8.8 billion - sign the cheque now'. That wasn't the nature of the conversation."

Mr Stevens declined to say who suggested the $8.8 billion figure, although he did say Mr Hockey was "very abreast" on the issue of the fund's depletion.

He said it had been a concern to the RBA "all along".

While the bank wasn't close to being insolvent and was able to carry out its functions unimpaired, there was a genuine risk for taxpayers if the fund was depleted.

"It is not a pretend risk... in my opinion it is appropriate to put an amount of capital against that genuine risk," Mr Stevens told the committee.

"But it hasn't meant that we have been unable to conduct monetary policy or do our financial stability matters and no one was suggesting that."

Mr Stevens said he expected the RBA to provide a dividend to the federal government in August 2014.

"My expectation, at this point, would be unless there is a big event that happens in the next seven months, come next August we would be making a dividend to the commonwealth in the normal way," he said.

The RBA didn't pay the government a dividend in 2013, after handing over $500 million in 2012.

Before the $8.8 billion grant, the RBA reserve fund was around $2.5 billion.

Australian economy is better than most: Stevens

The Australian economy has its challenges, but we're better off than most other countries and we're in an enviable economic position some years after the global financial crisis, Governor Stevens said.

That's despite the federal government's revelation yesterday that the 2013-14 federal budget deficit had blown out by $17 billion since the election, he said.

While the economy was currently experiencing below-trend growth, it was still "12 or 13 per cent bigger than it was" before the GFC, Mr Stevens said.

The banking system is stronger now than it was in 2008 and while unemployment is higher, it remains low by historical standards and when compared with many other countries, he said.

"I think we have a record of macro-economic success in that period that, in all immodesty I suppose, many other countries wish they had," Mr Stevens said.

"It's certainly true we have a buildup of government debt and that's a medium-term challenge for us to address but... it isn't actually about a surplus or a deficit in any particular year.

"Even with the debt numbers that have been put out yesterday and the projections, there are a lot of countries who would rather have that set of numbers than the ones they have.

"I think we have problems, we have big challenges, but I'd rather have most of our challenges than the ones I see around the table with governors I sit with a number of times a year."

Borrowing costs not hitting growth: Stevens

Although the RBA is open to lowering interest rates even further, there are "few serious claims" that the cost of borrowing per se is holding back growth, Governor Stevens said.

"On the contrary, monetary policy is supporting higher spending by altering incentives as between spending and saving, and working to create an environment in asset and credit markets that eases the restraints on some sorts of activity," he said.

"In the end, though, firms and individuals have to have the confidence to take advantage of that situation.

"They have to be willing to take a risk - on a new project, a new product, a new market, a new worker.

"Monetary policy can't force spending to occur."

Governor Stevens told the committee that many policies collectively affect business productivity.

"It is hard to escape the feeling that we as a society have tended, for quite a long time now, to go about our decisions on such matters while making the assumption, perhaps without realising it, that solid growth of the economy will simply continue, and that it won't be affected by these other choices of various kinds.

"We are at a moment now when that assumption has to be questioned.

"The path of pro-growth, pro-productivity, confidence-building reforms would mean that the basis for investment and growth in real incomes would improve."

Governor Stevens said that growth would allow consumption to grow without recourse to excessive borrowing and provide a revenue base for governments to provide services and infrastructure to the community.

"The alternative path is a much less attractive one," he said.

Governor Stevens said the central bank expects below-trend growth in GDP to continue for a bit longer, then strengthen over the medium term.

Mining investment has reached its peak, while non-mining investment remains at a low ebb, he said.

Resource sector investment is likely to decline gradually at first, then more quickly thereafter, and to fall considerably over the next few years, he said.

"There is therefore scope for other forms of private demand to grow more quickly, the more so as government spending is scheduled to be subdued," he said.

"Investment in dwellings shows clear signs of a significant increase, and exports of resources will continue to rise strongly."

Governor Stevens said that over the year, fears of a euro area break-up had abated, the United States economy was gradually recovering and the slowdown in China had run its course.

"So the past year can perhaps be labelled as: not quite as good as hoped for, but not as bad as feared," he said.

Read more: http://www.businessspectator.com.au/news/2013/12/18/reserve-bank-australia/rba-still-open-dollar-intervention
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hoofarted
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peter fraser
18 Dec 2013, 07:42 PM
That jump had everything to do with a jump in the UK Pound against a basket of currencies after some very good numbers, and little to do with the $Aussie.

What was your point?
Sorry Pete. Just stick to your debt peddling because this looks everything like it has to do with the AUD...

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Edited by hoofarted, 18 Dec 2013, 08:51 PM.
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peter fraser
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hoofarted
18 Dec 2013, 08:51 PM
Sorry Pete. Just stick to your debt peddling because this looks everything like it has to do with the AUD...

Posted Image
Then i suppose that you hadn't noticed that the UK pound had recently made some large gains on the USD as well.

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Edited by peter fraser, 18 Dec 2013, 11:01 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Catweasel
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Catweasel say it a bizarre,

how mouse perceive its own the dollar.

Mouse have the national pride at a stake,

but much the extend of its emotions.

No the need for a defensive,

if it not the interest,

to take a position,

it no the problem,

until it take holiday in Disneyland.
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peter fraser
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Catweasel
18 Dec 2013, 11:19 PM
Catweasel say it a bizarre,

how mouse perceive its own the dollar.

Mouse have the national pride at a stake,

but much the extend of its emotions.

No the need for a defensive,
I want it to fall actually, and it is gradually. But it seems to find support because traders aren't expecting our economy to falter as much as some here think it will. otherwise it would be around 0.80 USD.


Quote:
 
His point is a good one because he notes that international investors and currency traders are too smart to believe that the AUD will remain weak in the long term.

“They (investors, companies and traders) believe a return to growth will induce tightening and a stronger currency, so they don’t invest long term to capture the benefits of a weaker currency,” he said.


reference - Greg McKenna Business Insider - Here
Edited by peter fraser, 18 Dec 2013, 11:51 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Catweasel
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peter fraser
18 Dec 2013, 11:31 PM
I want it to fall actually, and it is gradually. But it seems to find support because traders aren't expecting our economy to falter as much as some here think it will. otherwise it would be around 0.80 USD.





reference - Greg McKenna Business Insider - Here
Catweasel say mouse have its weaker the dollar.

But it need to realize its gurus have the no power or magic,

to know a value of AU the D be a 80.

Not the so long ago,

squawk gurus speculate on 150.

And of the course,

NZ the D a darling of a month in a global the trading,

but it not read in a Herald the Sun.
Mrs Catweasel say Alan the Kohler now a broadcast to mouse about a NZ the D.

It the shame can not the see and broadcast 1-2 years ago,

for benefit of flock of mouse.
Edited by Catweasel, 19 Dec 2013, 12:21 AM.
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Foxy
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Zero is coming...

Catweasel
22 Nov 2013, 10:52 AM
Catweasel say mouse could have sold the up,

12-18 month ago,

throw all in a NZD linked to a NZSE50 ETF,

and mouse would be much better off than dreams of mouse house price orgy.

But a seminars and press releases not the mention.

If world can be the easily predicted,

as mouse house price in a Australia,

it the be like gifting money trees with voucher for free happy meal.
If N.Z. is our salvation.
We must be in deep.
Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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